Savings Schemes
by 5paisa Research Team Last Updated: 2023-05-15T11:46:50+05:30


The full form of GPF is General Provident Fund. It is a savings scheme that caters to the financial needs of government employees in India. Introduced in 1960, the government manages the fund. The employee and the government contribute to it. The primary objective of this fund is to provide a dependable source of retirement income for government employees. 

Employees can withdraw their savings from the fund upon retirement or resignation from service. The GPF also offers a competitive interest rate, revised quarterly. This feature makes it a valuable investment for government employees as it is a secure way to save for retirement and provide financial security in unforeseen circumstances.

What Is a General Provident Fund (GPF)?

The General Provident Fund (GPF) is a long-term investment option that allows government employees to accumulate savings over their employment tenure.

GPF is a mandatory scheme for government employees, requiring them to contribute a certain percentage of their salary towards the fund. The contributions are deducted from the employee's monthly salary, and the amount earns interest at a predetermined rate.

The GPF scheme is administered by the Department of Pension and Pensioners’ Welfare,  falling under the Ministry of Personnel, Public Grievances and Pensions. This scheme offers several benefits to government employees, including tax savings, low-risk investments, and guaranteed returns. 

A GPF is flexible, allowing employees to withdraw money from the fund for various reasons, such as marriage, education, and medical emergencies.

How General Provident Fund (GPF) Works?

GPF works in the following ways.

●    Employees are required to open a GPF account with their employer, usually at the time of joining the service.

●    A percentage of the employee's salary is deducted monthly and deposited into their GPF account.
●    This deduction is set at a certain percentage of the employee's basic pay.
●    As per the current guidelines, the GPF deduction rate is fixed at 6% of the basic salary of an employee, subject to a minimum of Rs. 500 per month. However, this rate may vary depending on the rules and regulations of different state and central government organisations.
●    Employees can also increase the GPF deductions as per their choice.
●    The amount deposited in the GPF account earns interest, typically determined by the government each year.
●    Employees can also take out loans against their GPF account, subject to certain conditions.
●    Employees who transfer to another government department or leave their job can withdraw their GPF balance or transfer it to their new employer.

Key Features of General Provident Fund (GPF)

●    GPF currently offers an interest rate of 7.1%.
●    A monthly subscription fee is required, except during suspension periods.
●    Subscriptions to GPF are halted three months before the superannuation date, as mentioned in the pension portal of the Government of India.
●    The employee requires no application for the final payment from the fund.
●    To receive the accumulated credit in the event of the employee’s death, an employee must nominate a family member while registering for the fund.
●    According to GPF regulations, the nominee is entitled to receive an additional payment equal to the average balance in the deceased’s account over the three years preceding the employee’s death.
●    The maximum extra amount that this scheme covers is Rs 60,000. Additionally, the employee must be actively working for at least five years to be eligible for this benefit.

How to Open a GPF Account?

To open a GPF account, employees must submit an application form to their employer, with copies of necessary documents such as an appointment letter, PAN card, and bank passbook. 

Once the employer approves the application, the employee's GPF account is opened. Later, a fixed percentage of the employee's salary (usually 6% of their basic pay) is deducted monthly and deposited into the GPF account. Employees can monitor their GPF balance and track transactions through their employer's finance department. 

GPF Contribution Amount

The GPF contribution is fixed at 6% of the basic salary for employees in Group A, B, and C. However, employees can increase their GPF deductions to 100% of their basic pay.

For instance, employees with a basic pay of Rs. 50,000 will have a minimum GPF contribution of Rs. 3,000 (6% of 50,000). But they can increase their GPF deduction to a maximum of Rs. 50,000 (100% of 50,000) monthly.

GPF Advances

General Provident Fund (GPF) advances are loans that employees can acquire against their GPF balance for specific purposes. GPF advances are subject to certain conditions, and the rules may vary between government departments.

The amount employees can borrow as an advance is typically limited to a percentage of their GPF balance. The maximum amount that can be borrowed is 75% of the account balance or 12 months' basic pay, whichever is less. However, in certain exceptional circumstances, the authority that approves GPF withdrawals may permit the withdrawal of up to 90% of the account balance.

The GPF advance must be sanctioned and credited within fifteen days from the date of request. There is no need for any documentary proof to be furnished by the employee to claim for GPF advance. 

Employees can repay the advance in 60-month instalments, typically made through monthly deductions from their salary. The absence of any interest in GPF advances makes it a desirable choice for employees who require funds for certain purposes. 

No interest charged on GPF advances makes it an attractive option for employees who require funds for specific purposes.

Account holders can make multiple claims for GPF advances throughout their careers. Even if they are repaying an existing GPF advance, request a new advance.

The Interest Rate of the General Provident Fund (GPF)

The government determines and reviews the General Provident Fund’s (GPF) interest rate annually. As of 2022-2023, the interest rate on GPF is 7.1%. This interest is calculated yearly and credited to the employee's GPF account at the end of each financial year.

Eligibility for General Provident Fund

Eligibility for the General Provident Fund (GPF) in India is as follows.

●    Employees of the central government and certain state government employees are eligible for GPF.
●    Employees should not have opted for any other provident fund scheme provided by the government or any other organisation.
●    Employees who are on deputation outside India are not eligible for GPF.
●    Temporary employees who have completed one year of continuous service are also eligible for GPF.

Maturity and Withdrawal Process of GPF

Here is the maturity and withdrawal process of GPF.
●    The GPF account matures when the government employee retires or reaches the superannuation age.
●    Employees can withdraw their GPF funds for various reasons, but they must have completed ten years of service or have ten years left until their superannuation date. This rule applies if the employee has continuously worked in the government service.
●    If an employee resigns from the job at any point, they can withdraw their GPF balance regardless of their service tenure.
●    After maturity, the employee can withdraw the complete balance or opt for a monthly pension.
●    In case of the employee's death, the balance in the GPF account is paid to the nominee or legal heir.

Benefits of Investing in a General Provident Fund (GPF)

Here are some benefits of investing in a General Provident Fund (GPF).

●    Secure retirement: GPF investment ensures a secure retirement for government employees by providing a source of funds post-retirement.
●    Guaranteed returns: The GPF offers guaranteed returns at a fixed interest rate, which the government reviews and revises periodically.
●    Tax benefits: Contributions to GPF are eligible for tax deduction under Section 80C of the Income Tax Act.
●    No-risk investment: GPF is a no-risk investment option as the government backs it and offers a fixed rate of return.
●    Loan facility: Employees can avail themselves of loan facilities from GPF for various purposes, including house construction, education, and medical expenses.
●    Flexibility: GPF investments provide flexibility regarding withdrawal and partial withdrawal options, which the employee can avail of in case of emergencies or unforeseen expenses.

Difference Between GPF, EPF, and PPF






General Provident Fund

Employees Provident Fund

Public Provident Fund

Eligibility Criteria

Government employees

Private employees

All individuals

Interest Rates




Maturity Period

Till retirement

Till retirement (Up to 58 years of age)

15 years

Minimum Deposit

6% of the basic salary

12% of the basic salary

Rs 500 p.a.

Maximum Deposit

100% of the basic salary

12% of the basic salary

Rs 1.5 lakh p.a.

Premature Closure

If the individual quits their government job

Being unemployed for more than 60 days

Allowed after 5 years for emergency purposes



General Provident Fund (GPF) is an excellent long-term investment option for government employees in India. It is designed to provide a dependable source of retirement income for government employees and offers a competitive rate of interest that is revised every quarter.

Moreover, the flexible scheme allows employees to withdraw money from the fund for various needs. The GPF is easy to open, and the contribution amount is set at a certain percentage of the employee's salary. The GPF scheme also offers tax savings, low-risk investments, and guaranteed returns, making it an attractive option for government employees to save for their retirement and financial security.

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Frequently Asked Questions

GPF (General Provident Fund) and PPF (Public Provident Fund) are savings schemes offered by the Indian government, but they differ in terms of eligibility, investment limits, and withdrawal options. GPF is only available to government employees, while PPF is open to all Indian citizens.

General Provident Fund generally deducts 6% of the basic salary.

Yes, GPF offers tax benefits. Employee contributions to the GPF are deductible under Section 80C of the Income Tax Act up to a maximum limit of Rs. 1.5 lakh per year. Interest earned on GPF contributions is also tax-free.

The primary difference between CPF (Contributory Provident Fund) and GPF (General Provident Fund) in India is that CPF is a voluntary scheme for government employees, whereas GPF is a mandatory scheme.

In the event of a subscriber's demise, the nominee or legal heir will receive the GPF amount, as specified by the subscriber during their lifetime. If no nominee or legal heir is mentioned, the person who establishes their claim as per the succession laws applicable will receive the fund.